Developing Government Bond Markets: A Handbook by World Bank

By World Bank

This instruction manual provides an summary of the main coverage issues for setting up a central authority securities industry. It additionally bargains a close description of the coverage concerns, together with issues for implementation. This instruction manual covers such issues because the linkages with funds markets and fiscal coverage operations, rules had to improve an issuing process, debt-management issues to construct credibility, and the reforms essential to advertise institutional funding. It contains bibliographic and web site references in addition to a accomplished word list of phrases relating to securities markets.

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4 Decpossible 2009 03:21:59 and/or syndication) Wed, and 16 the use of primary dealers. In return for meeting the obligations for being designated a primary dealer, governments 14 (c) The International Bank for Reconstruction and Development / The World Bank Developing a Government Bond Market: An Overview grant primary dealers some privileges, often including exclusive access to the auctions. Auctions are the common method for the sale of government securities in most domestic markets, following the pattern of Treasury bill auctions and requiring a number of independent bidders.

For such markets, increased trading frequency would be warranted, and at an appropriate time the market could move to continuous trading. Automated trading systems are increasingly the preferred venue for most countries, with their costs three to four times lower than those of traditional exchanges using a floor and open-outcry method. These developments increasingly give official issuers the capacity to sell and distribute securities directly to final wholesale and retail investors. Given the rapid pace of technology in this area,17 freedom of entry to proprietary providers of trading systems that are organized as corporations must be ensured.

These obligations can substitute for Treasury bills where there is not yet a working Treasury bill auction. Central bank securities can be traded in the market, helping to facilitate development of a secondary market. Where there is a Treasury bill market, however, central bank bills may fragment demand, especially if Treasury bills and central bank bills carry similar maturities. Coordination is required to avoid conflicts between the government’s debt/cash management and the central bank’s open market operations.

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